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    BJ's Posts Healthy Q4

    NATICK, Mass. -- Thanks in large part to spectacular growth in comparable sales of private brands and perishables, BJ's Wholesale Club, Inc., based here, yesterday reported net income for the fourth quarter of 2005 of $51.6 million, or 76 cents per share, vs. $47.0 million, or 67 cents per share for the fourth quarter of 2004, a 13.4 percent rise in EPS.

    NATICK, Mass. -- Thanks in large part to spectacular growth in comparable sales of private brands and perishables, BJ's Wholesale Club, Inc., based here, yesterday reported net income for the fourth quarter of 2005 of $51.6 million, or 76 cents per share, vs. $47.0 million, or 67 cents per share for the fourth quarter of 2004, a 13.4 percent rise in EPS.

    Results for the fourth quarter included one cent per share of expense to increase the company's reserve for credit card claims. Year-ago results included six cents per share of expense related to corrections in lease accounting. Adjusting for these expense items, adjusted net income would have been 77 cents for the fourth quarter of 2005, as opposed to 73 cents for the fourth quarter of 2004, a 5.5 percent increase.

    For the full year ended Jan. 28, 2006, net income was $128.5 million, or $1.87 per share, compared to $114.4 million, or $1.63 per share the year before. Adjusting for the unusual income and expense items in both years, adjusted net income per share on a non-GAAP basis would have been $1.83 in 2005 and $1.67 in 2004, representing an increase of about 10 percent.

    Total sales for the fourth quarter of 2005 went up 5.0 percent to $2.1 billion, and comparable-club sales grew 1.7 percent, including a contribution from gas sales of 1.0 percent. For the full year, sales rose 7.8 rose to $7.8 billion, and comparable-club sales increased 3.6 percent, including a contribution from gas sales of 1.3 percent.

    In a conference call yesterday BJ’s president and c.e.o. Mike Wedge noted double-digit comp-sales increases in private brands and fresh foods. According to Wedge, private brands represented 12 percent of sales at year-end, up from 9 percent last year, though the company believes it can increase the penetration rate to 20 percent of sales over the next few years. He added that BJ’s ended the year with 1,400 private brand SKUs, and that on a comparable-club basis sales of private brands increased 47 percent – "A truly remarkable result," in Wedge's words.

    Although Wedge later conceded that the company was "still underdeveloped in private brands relative to most of retail," as its private brands had only been in existence for about a year, he said that the trend was that private label would continue to gain share, and should enhance traffic, loyalty, and membership renewal. He added that the company would continue to see growth in improved offerings of private brands across the board, including premium brand labels.

    Wedge said that for BJ’s, food is "such a strong piece of our business and continues to be a key driver." As an example, he observed that the company was in the process of upgrading about 40 clubs with additional refrigerated cases, doubling linear footage of produce, in which category BJ’s has seen 18 percent to 20 percent comparable-sales gains. Additionally, the company is planning various club enhancements focused primarily on fresh foods, he noted. The company has also experienced "great growth in breadth and quality, [as well as] double-digit comp-sales increases in prepared meals," said Wedge.

    The company saw overall comparable-club food sales increase 4 percent in the fourth quarter and 6 percent during fiscal 2005.

    The company opened nine clubs in fiscal 2005, including a second research-and-development club, in Cape Coral, Fla., which, like its sister R&D club in Kissimmee, Fla., experienced sales that exceeded plans. BJ's began construction on a 600,000-square-foot cross-dock facility in Uxbridge, Mass., replacing a smaller, older facility. The facility, which will cost $35 million to $40 million and is slated to open in July 2006, will provide capacity for the company’s projected growth in the Northeast, said Wedge.

    BJ's has 12 to 15 clubs in the pipeline for 2006, among them locations in Norfolk, Va.; New Tampa, Fla.; Raleigh, N.C.; Valley Stream, N.Y.; and Stratford, Conn., and 15 to 18 on tap for 2007, noted Wedge, who added that the company was planning for three more years of growth within its current markets.

    Wedge also spoke about filling a number of key positions among BJ's upper management, and said that in the coming months the company expected to announce the appointment of a new e.v.p. and c.f.o. to succeed Frank Forward, who is currently serving as interim c.f.o. New s.v.p. and c.i.io. John Polizzi is guiding the company's new e-commerce program to a midyear launch, he said.

    To combat a downturn in comparable-club general merchandise sales (3 percent decline during the fourth quarter, 2 percent decrease for the fiscal year), Wedge said the company would launch such initiatives as a direct-mail campaign next month with coupons for high-ticket general merchandise items such as TVs and furniture. Additionally, about 30 clubs now feature an enhanced electronic presentation, according to Wedge.

    The company expected total sales to increase 10 percent to 12 percent for year, Wedge noted.

    BJ's also reported yesterday that February 2006 sales grew 5.9 percent to $567.8 million from $536.1 million in the year-ago period, thanks in part to rising food sales in such categories as produce. Comparable-club sales increased 1.6 percent for February, including a contribution from gasoline sales of about 1.9 percent. Last year BJ's reported comparable-club sales of 6.7 percent, including a contribution from gas sales of 30 basis points.

    On a comparable-club basis, sales were highest in the second and fourth weeks of February, the retailer said. Including the year-over-year impact of snowstorms, comparable-club sales for the month were adversely affected by about 2 percent, BJ's said.

    By major region, comparable-club sales were best in the Southeast and in Upstate New York, the company added.

    Excluding gasoline sales, the average transaction amount for February increased about 4 percent, while traffic declined about 4 percent.

    On a comparable-club basis, food sales went up about 2 percent, and general merchandise sales slid about 3 percent. Among the categories with solid comparable-club sales increases were electronics, televisions, paper products, and produce, while categories such as apparel, computers, and DVDs turned in weaker comparable-club sales.

    BJ's currently operates 163 BJ's clubs and two ProFoods Restaurant Supply Clubs.

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